The pace of inflation in Canada picked up in December, close to forecasts and providing some respite for the Bank of Canada and its concerns that weak price gains poses the biggest risk to the economy. Continue reading.

And Mr. Dwyer thinks enough ammunition is being provided by weak Chinese manufacturing data, more tapering from the Federal Reserve at its meeting next week, and U.S. Treasury Secretary Jack Lew renewing debt ceiling fears.

“As we move through the correction process, it is always important to remember that corrections are considered ‘natural, normal, and healthy’ – until they actually happen. This one should prove no different,” Mr. Dwyer told clients. “Until there is real fundamental change that is driven by the Fed raising rates enough to cause a yield curve inversion, we strongly urge investors to avoid the thought that ‘the market is telling us something.'”

The strategist noted that history suggests the market is tired and overdue for a pullback in excess of 5%.

He also pointed out that when the S&P 500 peaked last week, it had risen 17.5% over 142 trading days since the last 5% pullback, representing the third longest winning streak since 2000.

As technically overbought as the stock market may be, David Rosenberg, chief strategist and economist at Gluskin Sheff + Associates noted that the economy is still in the best quadrant of the cycle. He attributes this to the fact that monetary accommodation is coinciding with positive economic momentum.

“This means that corrections will not cause the fundamental bull market to expire,” Mr. Rosenberg said, noting his base-case scenario for the market as a whole is total return of about 7% in 2014.

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“Much of the future return has already been put into the cash register, but it does also mean that any correction phase will likely emerge as a buying opportunity as everyone in the past…proved to be,” he added.

With expectations that the Fed will continue to taper next week, de-risking is driving capital into safer havens such as gold, the Japanese yen and the U.S. dollar.

“Only a couple of weeks ago every man and his dog were writing off gold,” said Michael Hewson, chief market analyst at CMC Markets UK.

But the ongoing turmoil in emerging markets is serving to underpin bullion, sending pricing to a two-month high on Friday.

“While these predictions could well turn out to be accurate, if equities continue to fall and concerns about emerging markets fail to diminish, there is a good chance we could well see further gains towards the $1,300 level,” Mr. Hewson added.

Camilla Sutton, chief FX strategist at Scotiabank, noted that Argentina, Turkey and South Africa are under tremendous pressure.

Thursday’s 12% collapse in the Argentine peso is of particular concern. But outside of the most vulnerable, Ms. Sutton sees limited signs of panic.

“There has been a reaction in the sense that other EM currencies have weakened. However, to date most of the concern continues to lie with the most vulnerable,” she said. “Markets are nervous and watching closely for signs of contagion.”

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